Private equity shows strong interest in med spas and wellness centers, creating opportunities for business owners to sell or partner for growth. While profitable, this process can be complex. Bill Walker, CEO of Aesthetic Brokers, shares key insights on how to navigate it effectively.
Private Equity in Aesthetics
Private equity firms aim to make businesses more efficient and profitable. Walker explains, “Their goal is to provide successful returns to their investors and the healthcare providers that are owners of these practices, right? That’s what they want to do.”
He adds, “That’s what private equity does. They want to give outsized returns. And the way to do that is to make a very efficient operation footprint in the background to support those care providers, those doctors, those NPs, those PAs, those RNs, that’s what they want to do and elevate their game.”
Culture Fit and Strategic Partnerships
Beyond financial incentives, business owners should consider cultural alignment. Walker advises, “It comes down to picking the right culture fit a lot of times, too, because you might find a couple of private equity firms that resonate with the financial upside you might see. And so it’s really about culture fit. Well, who’s in the C-suite and the leadership at the portfolio company?”
He stresses, “They want a good partner, that they genuinely want a good partner. So, be straightforward and candid about what you want from the relationship. And they’ll return that in kind.”
Negotiating the Best Deal
Negotiating a sale is challenging, and Walker highlights the need for expert representation: “Typically, when we come into the mix, one of the hardest things is negotiating on your behalf. Statistics will tell you that you’ll always get a better deal if somebody’s negotiating on your behalf.”
Market Trends and Timing
Market conditions fluctuate, but Walker predicts strong growth: “It’s warm. Now you gave me three choices. You gave me vanilla, chocolate, and strawberry. I said it’s warm. And so here’s why. I think there was a little hangover on the backside of 2023 that people were trying to bake into their investment thesis. And because of that, they wanted to calculate where interest rates would fall out in the markets.”
He adds, “I think it is, as a result, warm, and I think it’s going to be red hot over the next 12 months.”
Deal Sizes and Exit Strategies
Private equity deals vary widely in size. Walker shares, “I’m not allowed to disclose that, but I will tell you it’s a larger eight-digit deal.” On the smaller end, “It was a smaller six-digit deal. I like to partner with and represent good, solid, and fun people. And I’ll go to the mat for them.”
Selling timelines differ, but Walker suggests planning: “It is not uncommon to plan strategically for a year to two years. It’s not uncommon to plan for two to three months and do a deal in about nine months.”
Key Considerations for Business Owners
Preparation is crucial before selling. Walker advises, “Get a good accountant and know your numbers, right? Because every dollar matters so much when you’re starting.”
Lease agreements also matter: “Negotiate an outstanding favorable lease because a lot of people don’t think about it.” A bad lease can create obstacles if a sale opportunity arises.
The Role of Private Equity in Aesthetic Growth
Many worry about losing control, but Walker clarifies: “They want a well-run, well-respected pillar in that neighborhood, in that community. That’s what people come to you for.”
For those considering a sale, he suggests, “Give you a call… Just get a second opinion from a professional who can help. I’ll always jump on a 30-minute call with somebody to help give them a perspective. This is what you told me in 25 minutes. If I were you, these are some things I would consider.”
Takeaway
Selling a med spa to private equity requires planning, the right partnership, and strong negotiation. Business owners who understand their value and seek expert advisors will be in the best position for success.
For guidance, Walker advises, “It’s not very complicated. You can go to our website, as well.”
Listen to the full episode on Spotify: Aesthetics Appeal
